Supporting People projects, which protect vulnerable men and women, are being axed. Photograph: Martin Godwin

The Labour government launched the Supporting People (SP) programme eight years ago with high hopes. It would avoid high-cost hospital and institutional care for many vulnerable members of society by helping them to live independently in the community, parliament was told in 2003.

SP took off with a £1.4bn budget and a pledge to aid diverse groups including older people, drug and alcohol users, ex-offenders, and those with mental health or learning disabilities. But an investigation by the Guardian housing network has discovered that services for the most vulnerable groups are under threat of closure. English authorities charged with commissioning support are also directing their axes towards services that could save them the most in the long run. With town halls facing a 30% budget cut over the next four years, SP budgets are at risk of being plundered to pay for more pressing concerns.

Our study of 10 authorities found several are threatening to wipe out or severely reduce SP funding for people with mental health, physical and learning disabilities, ex-offenders and older people. In some cases councils are wielding the axe despite warnings from their own officials that thousands of vulnerable people could suffer severe consequences.

Frantic negotiations between charities and councils have saved some services, but many remain threatened. The coalition government – which claims SP's £6.5bn four-year budget is only subject to an annual 1% cut – and lobby groups are alarmed at our findings and councils' willingness to risk the wellbeing of vulnerable residents.

Wielding the axe

Nottinghamshire council has proposed stopping funding for wardens and emergency alarms in sheltered housing in a move it admits will have a significant impact on 11,500 older people, official papers show. Plans to slash all SP funding for people with mental health problems in Hull would "increase the need for acute mental and health and social care interventions, anti-social behaviour, and increased risk of isolation and self-harm", council officials warn in a report.

Some of these services have been saved following a change of political control in this year's local elections, according to a spokesperson for Hull council. But many remain at risk of closure, she confirmed. An 18% cut in funding for people with learning disabilities in Haringey could create "potential safeguarding risks", according to its official assessment. Tameside council admits a proposed 8% cut to its £7.2m budget could have a negative impact on teenage parents, woman fleeing domestic violence, and drug and alcohol abusers, among others [see footnote]. Elsewhere, funding for ex-offenders, those with learning disabilities and HIV/Aids sufferers are also all due to be dropped or reduced (see table below).

Paul Farmer, chief executive of mental health charity Mind, said the sudden withdrawal of support for mental health sufferers would have a devastating effect.

"It is alarming to see local authorities making funding cuts while knowing that this will have an adverse effect on service users as well as [cause] higher costs in the long run," he said. Beatrice Barleon, senior campaigns and policy officer at Mencap, warned that ending or reducing support without proper assessments would prevent individuals living independently. "People will move back with their parents or into a more institutional setting," she said.

Habinteg, a housing association which mainly houses people with physical or sensory impairments, has seen its SP income slashed by 11%. Director of operations Deborah Stephenson fears next year's cuts will hit services harder. The association said the cuts risk a return to a "bygone era of isolation and exclusion from society" for disabled people with support needs.

Domini Gunn, director of public health and vulnerable communities at the Chartered Institute of Housing, believed SP cuts would hit the wider community as well as those it previously supported. "This is likely to be seen in higher levels of anti-social behaviour, including the risk of harm to vulnerable people, and increased levels of offending behaviour," she said. "The future costs to vulnerable people, communities and to the public purse will be high."

Research by the National Housing Federation reinforces the findings of our survey, revealing that cuts are targeted at particular groups. Its survey of 140 housing associations revealed that services for older people and so-called "unpopular" groups were hardest hit. Federation policy officer Jake Eliot said councils were forced to make quick decisions. "There needs to be some serious long-term thinking to avoid very damaging unintended consequence," he added.

The greatest financial benefits of SP services are generated by the services that the NHF and our survey reveals are the most likely to be cut, a study prepared for ministers shows. Every pound spent on supporting older people and drug problems generates a £4 net benefit to the public purse, according to the consultancy Capgemini.

A net benefit of £1.2bn is generated for half that amount spent on helping people with mental health problems and learning disabilities. The Department for Communities and Local Government hailed this conclusion as "powerful yet intuitive" and had clearly hoped that councils would feel the same. Ministers are therefore "disappointed" that councils are making significant cuts to SP services, a CLG spokesperson explained. "It is difficult to understand why some councils appear to be targeting disproportionate spending reductions on programmes that support the most vulnerable in their communities," the spokesman said.

Eight years on from its launch, the SP programme should still be considered an "invest to save" programme, the CLG spokesperson added. "[Councils] already know that investment in preventative housing-related support can save them huge bills in more expensive social care costs later on." It is a point on which the coalition and the Labour founders of the SP programme seem to agree.

Summary: where the cuts will fall

• Services for ex-offenders and those at risk of offending axed in Hull

• Support for people with mental health problems axed in Hull, slashed by 42% in Haringey despite high levels of demand, and reduced in Rochdale, Kent and Tameside

• Services for people with physical disabilities axed in Hull, and reduced in Kent and Nottinghamshire

• Support for older people axed in Hull and Nottinghamshire, and reduced in Essex, Kent and Calderdale

• Support for people with learning disabilities severely reduced in Hull and reduced in Kent, Essex and Haringey

• Sheffield will pool SP cash for learning disabilities with social services funding

• Funding for Gypsies and Travellers halved in Nottinghamshire

• Cuts to Aids/HIV support in Bristol

• Axing of 12 beds for drug abusers in Hull

[Footnote: Tameside council's Equality Impact Assessment makes clear that the potential negative impact of cuts to the Supporting People programme will be avoided or mitigated by a range of actions.]